Why Netflix Is Struggling In India

Netflix has become a staple in American homes. So it may be hard to believe that the majority of its 137 million subscribers are international. The streaming giant has expanded to more than 190 countries, but one country where Netflix has had a difficult time breaking through is India. Both Netflix and Amazon Prime Video launched in India in 2016. Thanks in part to the drastic drop in mobile data prices. Streaming services, once considered a luxury, suddenly became increasingly attractive to Indians. India is now the world's second largest internet market after China. More than 35 different streaming services have launched or expanded their businesses in India in the last three and a half years.

A company that streams Indian and Cricket movies and shows called Hot Star is leading the race. Research firm Jana estimates that Hot Star holds about 70% of the local on-demand streaming services market. Even Amazon Prime video is bigger than Netflix in India. And India's online video market, valued at more than $700 million, is expected to grow to $2.4 billion in value by 2023. But Netflix won't take a big chunk of that, analysts say. cake. We think Netflix probably has between half a million and a million paid streaming subscribers in India right now. Price could be one of the reasons why Hot Star has had an advantage on Netflix.

Hot Star offers its premium service for about $3 a month in India, and around 80% of its catalog is free to start with. Amazon Prime costs about $1.90 a month, including access to Prime Music. Compare that to the cheapest plan offered by Netflix, which costs just over $7 a month. Hot Star also offers broadcasting rights to most Cricket tournaments in India, the country's most popular sport. Earlier this year, 10.3 million viewers tuned in to Hot Star to watch the final of the Indian Premier League tournament. Facebook even offered to pay more than $600 million for the digital rights to the IPL, but lost out to Star India, which owns Hot Star.

It's worth noting that Netflix has deliberately stayed away from live sports streaming. in the U.S. It's a strategy that has worked well so far domestically, but it remains to be seen whether it will work in India. Then there is the hunger for local content, here again Hot Star has an advantage. Because it has been able to offer programs in regional languages ​​that it borrows from channels operated by Star India, its parent company. But Netflix has taken note of the demand. We'll go from expanding, you know, beyond English to Hindi and then into many more languages, more pricing options, more packages, all of those things are possible.

Now we'll take it, you know, a million at a time and figure out how to expand the market as we grow. Despite India's challenges, part of the reason investors have given Netflix its God rating is precisely because it has room to expand. It has been an incredible growth story and will continue to be an incredible global growth story as they expand into Asia, India and some of the international markets. So our assessment right now is $420 per share, that has progressed upward over time and we think given that overall runway, it's likely to continue in that direction.

It will take time for Netflix to strengthen its presence. In general, we have historically seen it take Netflix about three years to reach 10% home broadband penetration.